DAVID STOCKMAN'S NEW BOOK LOOKS FASCINATING

WASH POST REVIEW HERE.

EXCERPT:

Over the past 40 years, the United States has become a strange fantasy land where many politicians think deficits don’t matter, regulators are closely entwined with their charges, and the Federal Reserve manages the economy through high-stakes, high-risk experimentation. The financial turmoil of the past few years is just a glimpse of what lies at the end of the road we’re on, Stockman warns. 

In showing us where it leads, he takes the long way, ambling past the wreckage of fiscal and market calamities dating back a century, pausing to praise the gleaming fiscal conservatism of President Dwight D. Eisenhower, then arriving at the ever-more-dire failures of the last generation. 

The country began veering badly off course, Stockman argues, in August 1971. That was when Nixon decided to scrap the international financial arrangement that anchored the dollar’s value to gold and thus other currencies in the decades after World War II. “In an act that cascaded down through the decades, Richard Nixon caused the United States to default on its . . . obligations . . . and thereby inaugurated an era of global trade imbalance, currency pegging and manipulation, massive debt creation, and financial speculation that had no historic antecedents,” Stockman writes. “It became the era of bubble finance.” 

First came the bubble in global oil and commodity prices in the 1970s, then the bubble in U.S. stocks in the 1980s, the Tokyo bubble of the late 1980s, the Asian bubbles of the 1990s, the tech bubble at the millennium and finally the housing finance bubble that imploded so catastrophically in 2007 and 2008. 

Discrete events, the bubbles shared a genesis: They were often inflated by central-bank-created “easy” money — an abundance of low-interest-rate loans and other credit — that had been created to stoke economies, spawn jobs or spur exports. When share prices, or land and housing values, soared unsustainably and then crashed, the central banks reverted to what they knew and doused the smoldering ruins with a flood of yet more cheap cash. That in turn softened the earth for the emergence of the next asset bubble. 

Making things worse was a pattern of chronically shortsighted political decision-making and craven tax policies that distorted sound business practices and encouraged self-destructive behavior by the private sector. 

RTWT.

I DISAGREE WITH MUCH STOCKMAN HAS HAD TO SAY OVER THE YEARS - AND I DISAGREE WITH THE REVIEWER ON A LOT TOO - BUT IT'S  GOOD READ.